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Morning Commentary: Preferred stocks open weaker; First Republic frees to trade; Deutsche dives
By Stephanie N. Rotondo
Seattle, Feb. 4 – Despite a broader market rebound, preferred stocks remained soft in early Thursday trading.
The Wells Fargo Hybrid and Preferred Securities index was down 7 basis points at mid-morning.
Among recent deals that have not yet listed, First Republic Bank’s $150 million of 5.5% series G noncumulative perpetual preferreds – a deal from Wednesday business – freed from the syndicate, a trader reported early in the day.
He quoted the issue at $24.75 bid, $24.85 offered.
The deal was upsized from $100 million and came at the tight end of talk.
Meanwhile, Banc of California Inc.’s $125 million of 7% series E noncumulative perpetual preferreds were pegged at $24.80 bid, $24.85 offered.
That deal priced Monday.
From last week’s business, Citigroup Inc.’s 6.3% series S noncumulative preferreds were seen in a $24.90 for $25.02 context.
Those preferreds came Jan. 26, with $900 million shares being sold. On Monday, a market source reported that the greenshoe was exercised, lifting total issuance to $1.35 billion.
Away from new issues, a trader said Deutsche Bank AG’s preferreds were getting knocked down.
“People are scared,” the trader said, noting concerns about the German bank’s high leverage. “It looks like people are trying to get out of their positions.”
Not helping matters was the fact that it has been an illiquid market, the trader added. He further remarked that the bonds have been under significant pressure recently, pointing out that the 7.6% trust preferred securities (NYSE: DTK) were trading around $26.00 in January.
In early Thursday trades, that issue was down $2.30 at $22.03. The 8.05% TruPs (NYSE: DKT) were meantime off $2.60, or 10.37%, at $22.37.
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